Econ 101 Exam 4 (Final)

Mr. Sweet opened a candy store. He rented a building for $30,000 a year. During the first year of operation, Sweet paid $40,000 to his employees, $10,000 for utilities, and $20,000 for goods he bought from other firms. His total revenue was $135,000. Sweet's best alternative to running this candy store is to work for Wal-Mart as a sales associate for $15,000 a year. What is Sweet's total opportunity cost?

C- $115,000

The above table gives some production and cost information for Flaming Fernando's, a restaurant that sells Fiery Frijoles. What is the average total cost of producing 4,500 frijoles?

C- $2

In the above table, the marginal product of the 7th worker is 6. what is the total product when 7 workers are employed?

C- 70

Based on the above table, which shows the firms and sales in an industry, what is the four-firm concentration ratio?

C- 74

There are six firms in an industry, with market shares of 50 percent, 25 percent, 10 percent, 10 percent, 3 percent and 2 percent. The four firm concentration ratio is ________, and the HHI is ________.

C- 95;3338

In the above figure, the total fixed cost curve is curve

C- C

The difference between the market price of a new car used by a firm and the market price of the same car one year later is known as

C- Economic Depreciation

A company needs to know the price of each resource it employs if it wants to determine whether or not it is achieving

C- Economic efficiency

When Fatz confectionery can lower the cost of manufacturing and packaging a pound of candy by doubling the quantity manufactured and packaged each day, it will achieve

C- Economies of Scale

The above table shows the market shares for all the landscaping services in a suburban area. A merger between the three largest firms would

C- Increase the four-firm concentration ratio and increase the Herfindahl-Hirschman Index (HHI)

Profit maximization

C- Increases the likelihood that a firm will survive

Dell uses outsourcing, that is, Dell buys the components of the computers it produces from other firms. This is an example of

C- Market Coordination

In the above table, if the price of labor is $10 per hour and the price of capital is $20 per unit, which method of producing 50 space crafts is economically efficient?

C- Technique Y

In a corporation, the managers are the stockholders'

C- agents

The short run is a time frame in which

C- at least one factor of production is fixed

The above table shows the short-run total product schedule for the campus book store. At what levels of books sold per hour will the marginal product of labor be greater than the average product of labor?

C- both A and B are correct

The average total cost curves for Plant 1, ATC 0, and Plant 2, ATC 1, are shown in the figure above. Over what range of output is it efficient to operate Plant 2?

C- greater than 25

If a firm's marginal product of labor is less that its average product of labor, then an increase in the quantity of labor employs definitely will

D- decrease its average product of labor

Tudor's Deli and Catering could have sold their delivery van on December 31, 2010 for $16,000. If they could sell the same van on December 31, 2011, for $13,000, then the economic depreciation in 2011 for this van

D- is $3,000

The output at which average variable cost is a minimum is ________ than the output at which ________ is a minimum.

D- less than; average total cost

Diseconomies of scale definitely means that as the firm increases its output, its

D- long-run average total cost increases

When the total product curve is drawn in a figure that measures employment along the horizontal axis, it is a graph that shows the

D- maximum output attainable for each quantity of labor employed

Total product is

D- maximum output that a given quantity of labor can produce

One reason why firms replace markets for some activities is that firms

D- reduce the number of transactions required

A cost that has already been made and cannot be recovered is called a

D- sunk cost

In the short run

D- the size of the plant is fixed

A market is perfectly competitive if

D- there are many firms in it, each selling an identical product

The above table gives techniques Jitters Coffee Company can use to package 5,000 pounds of coffee. If the cost of capital is $50 per unit and the cost of labor is $100 per unit, the economically efficient technique for packaging 5000 pounds of coffee is

A- A

The table above shows four methods for producing 10 computer desks a day. If the cost of a worker is $100 a day and the cost of capital is $100 a day, the method that is economically efficient is ________.

A- A

Using the data in the above table, if the price of an hour of labor is $20 and the price of a unit of capital is $10, then the most economically efficient technique for producing 100 sweaters is

A- A

An economic profit for a self-employed entrepreneur is

A- A profit over and above opportunity cost

By making most of its employees owners of the company, United Airlines attempted to

A- Address the principal-agent problem between the workers and managers

Taco Bell produces both tacos and burritos because when it does so, Taco Bell experiences

A- Economies of Scope

If a firm chooses to produce 100 units of output for $150 with 10 units of labor and 12 units of capital, when they could produce the same 100 units for $120 with 10 units of labor and 8 units of capital, the firm is technologically ________ and economically ________.

A- Inefficient; inefficient

Which of the following statements regarding principal-agent relations is CORRECT?

A- Managers are both principals and agents

Even though the market for bricks has a low concentration ratio nationally, the U.S. Justice Department might still scrutinize any mergers in this industry because the

A- Market is regional not national, and the regional concentration might be high

The most important goal of the firm is to

A- Maximize its profits

Which of the following is a CORRECT statement?

A- Technological efficiency depends only on production methods, while economic efficiency depends on the costs of resources

Which of the following statements is TRUE?

A- When marginal product is less than average product, average product is decreasing

An example of variable factor of production in the short run is

A- an e mployee

In the above figure, the long-run average cost curve exhibits diseconomies of scale

A- between 20 and 25 units per hour

The principal-agent problem refers to the fact that firms must

A- device incentives to get employees to work in the best interest of the firm's owners

The goal of a perfectly competitive firm is to maximize its

A- economic profit

Use the data in the table above and suppose that labor is the only variable factor of production. When 122 dozen donuts are produced at Decent Donuts, the MC curve

A- has a positive slope

The marginal product of labor is equal to the

A- increase in the total product that results from hiring one more worker with all other inputs remaining the same

As output increases, total cost ________, total fixed cost ________, and total variable cost ________.

A- increases; does not change; increases

A firm's average total cost is $80, its fixed cost is $1,000 and its output is 100 units, Its average variable cost

A- is more than $60

In the short-run

A- no firm experiences economies of scale

The market demand for wheat is _________ and the demand for wheat produced by an individual farm is _________

A- not perfectly elastic; perfectly elastic

The short run is a period of time in which

A- the quantity of at least one factor of production is fixed

Kris wants to purchase a house. She buys newspapers to read the classified advertisements and spends her evenings with realtors looking at houses. Kris has incurred the ________ costs of making a purchase.

A- transactions

A perfectly competitive firm has a total revenue curve that is

A- upward sloping with a constant slope

Which of the following statements does NOT correctly characterize normal profit?

B- It is equal to a firm's total revenue minus its opportunity cost

What is the major advantage of the corporate form of business organization?

B- Its owners have limited liability

Emma owns a firm that produces umbrellas. Currently, Emma produces 2,500 umbrellas a day. Emma cannot produce more umbrellas in a day unless she purchases another machine or else hires more workers. Emma is ________ efficient.

B- Technologically

The owner of a proprietorship has ________ liability and ________ required to use all of his or her entire wealth to pay for the firm's losses.

B- Unlimited; might be

When Acme Inc. produces a certain amount of output by using the least amount of inputs, Acme Inc. definitely

B- achieves technological efficiciency

The long run is a period of time in which

B- all factors of production are variable

If as output increases average product increases then _________.

B- average variable cost decreases

In the long run, a firm can vary

B- both its labor and its capital

Electric utility companies have built larger and larger electric generating stations and, as a result, the long-run average cost of producing each kilowatt hour decreased. This is an example of

B- economies of scale

A firm finds that it can produce several different goods at a lower average cost by using some of the same production facilities than it could if it produced each of the goods with separate production facilities. This firm is

B- gaining economies of scope

A period of time in which the quantity of all factors of production used by a firm can be varied is called

B- long run

An advantage of the corporate form of organization is that

B- owners have limited liability

After constructing a new factory, the cost of building the factory is a

B- sunk cost

The average product of labor is equal to the

B- total product divided by the total number of workers hired

Suppose that Tracy and Pat start a business. Because of a series of bad decisions by Tracy, the company goes bankrupt, owing a total of $50,000. Tracy is penniless and Pat is a millionaire. If the company were organized as a partnership, Pat would be responsible for

B-$50,000 of debt

The above table shows the market shares for all the landscaping services in a suburban area. The four-firm concentration ratio equals

A- 65 Percent

In the above figure, the marginal cost curve is curve

A- A

Which of the following is NOT an assumption of perfect competition?

B- Firms compete by making their product different from products produced by other firms

Silvio's Pizza is a small pizzeria. The firm's production function is shown in the table above. Suppose that Silvio's costs include only the cost of renting ovens, which is $100 per oven per week, the labor cost, $280 per worker per week, and the opportunity cost of Silvio's entrepreneurship, $1,000 per week. Suppose Silvio's uses Plant1 and hires 3 workers. What is the firm's average fixed cost?

A- $11.00

The table above gives costs at Jan's Bike Shop. Unfortunately, Jan's record keeping has been spotty, Each worker is paid $100 a day. Labor costs are the only variable costs of production. What is the total variable cost of producing 60 bikes?

A- $300

Sheila's Sports Shop is a very popular sporting goods store, which has a yearly revenue of $600,000. Sheila runs the business herself. Her alternative employment options are to be a college swimming coach for $50,000 per year or a construction worker for $40,000 per year. Sheila spends $230,000 purchasing goods for resale to her customers. She also has four employees, who each earn $25,000 per year. Sheila owns the building that her Sports Shop is housed in and she could have rented it out for $20,000 per year. Sheila's costs for resources bought in the market equal

A- $330,000 per year

Using the table above, what is the marginal product of the 5th worker hired at Decent Donuts?

A- 22 dozen donuts per day

The table above gives production information for Bob's Baseball Cap Company. Bob's total cost when zero caps are produced is $200 and workers cost $10 per hour. The total fixed cost of producing 10 baseball hats per hour is

B- $200

Heidi quit her job as a chef making $40,000 per year to start her own restaurant. The first year, Heidi's restaurant earned $100,000 in revenue. Heidi pays $50,000 per year in wages to the waitresses and hostess and $20,000 per year to buy food. What is Heidi's economic profit for the year?

B- -$10,000

If an industry were perfectly competitive, the four-firm concentration ratio would be close to ________ and the Herfindahl-Hirschman index would be close to ________.

B- 0;0

In the above table, based on the four-firm concentration ratio, which industry is the most concentrated?

B- Blodgets

Over the years, the U.S. economy has become increasingly

B- Competitive

Silvio's Pizza is a small pizzeria. The firm's production function is shown in the table above. Suppose that Silvio's costs include only the cost of renting ovens, which is $100 per oven per week, the labor cost, $280 per worker per week, and the opportunity cost of Silvio's entrepreneurship, $1,000 per week. When Silvio's uses 2 ovens and hires the 3rd worker, the marginal product of labor is ________ the average product of labor, and therefore the average product of labor ________.

C- less than; increases

When a firm is experiencing economies of scale

C- the LRAC curve slopes downward

The long run is distinguished from the short run because only in the long run

C- the quantities of all factors of production can be varied

Bud opened a flower shop. He rented a building for $9,000 a year. To buy equipment for the store, he withdrew $10,000 from his savings account, which earned an annual interest rate of 3 percent. During the first year of operation, Bud paid $4,000 for utilities and $12,000 to his suppliers. The store's total annual revenue was $55,000. The market value of the store's equipment at the end of the year was $8,000. If Bud had not started this business, he would have continued to work as an employee at another flower shop for $30,000 a year. What was Bud's opportunity cost of running his business?

C-$67,300

Cindy's Sweaters' production function is shown in the above table. Cindy rents two knitting machines for $30 a day each and hires workers at a wage rate of $40 a day. What is the marginal cost of the 19th sweater?

D- $20.00

The above table shows some cost data for Tracey's Tents. What is the average total cost when output is 3?

D- $40

The above table shows the market shares for all the landscaping services in a suburban area. The Herfindahl-Hirschman Index (HHI) equals

D- 1600

Using the data in the above table, if the firm employs 5 workers, total product (measured in units per day) and average product and marginal product of the fifth worker (Measured in units per worker) are

D- 25, 5.00, and 2 respectively

In the above table, the marginal product of the third worker is

D- 4

The above table shows the total product of producing baseball hats. The average product of 3 workers is equal to

D- 6.00 baseball hats

Technological efficiency occurs when the firm produces a given output

D- By using the least amount of inputs

Where large amounts of capital are used, the dominant form of business organization is the

D- Corporation

Unlimited liability is NOT a characteristic of

D- Corporations

Which of the following types of business organization have limited liability? I.proprietorship II.partnership III. corporation

D- III Only

All the decisions made by people who operate firms have one overriding objective, which is to ________.

D- Make maximum attainable profit

The table below shows four alternative techniques for assembling a car. The cost of labor is $20 per hour, and the cost of capital is $10 per hour. Which of the four techniques for assembling a car is economically efficient?

D- T-4

Joe quits his job as an insurance agent and opens his own sporting goods store. If his profits as measured by his accountant are greater than zero, then

D- There is not enough information to determine his economic profit, if any

The national concentration ratio

D- Underestimates concentration for the newspaper industry and overestimates it for the automobile industry

Under oligopoly, there are ________ firms selling products that are ________.

D- a few; either identical or different

Economists define the short run as a period of time so short that

D- at least one factor of production cannot be varied

The average total cost curves for plants A, B, C, and D are shown in the above figure. It is possible that the long-run average cost curve runs through points

D- d, e, and f